FULL TEXT: The Full Statement On The ECB's New Bond-Buying Plan

6 September 2012 - Technical features of Outright
Monetary Transactions

As announced on 2 August 2012, the Governing Council of the
European Central Bank (ECB) has today
taken decisions on a number of technical features regarding the
Eurosystem’s outright transactions in secondary sovereign bond
markets that aim at safeguarding an appropriate monetary policy
transmission and the singleness of the monetary policy. These
will be known as Outright Monetary Transactions (OMTs) and will
be conducted within the following framework:

Conditionality

A necessary condition for Outright Monetary Transactions is
strict and effective conditionality attached to an appropriate
European Financial Stability Facility/European Stability
Mechanism (EFSF/ESM) programme. Such programmes can take the form
of a full EFSF/ESM macroeconomic adjustment programme or a
precautionary programme (Enhanced Conditions Credit Line),
provided that they include the possibility of EFSF/ESM primary
market purchases. The involvement of the IMF shall also be sought
for the design of the country-specific conditionality and the
monitoring of such a programme.

The Governing Council will consider Outright Monetary
Transactions to the extent that they are warranted from a
monetary policy perspective as long as programme conditionality
is fully respected, and terminate them once their objectives are
achieved or when there is non-compliance with the macroeconomic
adjustment or precautionary programme.

Following a thorough assessment, the Governing Council will
decide on the start, continuation and suspension of Outright
Monetary Transactions in full discretion and acting in accordance
with its monetary policy mandate.

Coverage

Outright Monetary Transactions will be considered for future
cases of EFSF/ESM macroeconomic adjustment programmes or
precautionary programmes as specified above. They may also be
considered for Member States currently under a macroeconomic
adjustment programme when they will be regaining bond market
access.

Transactions will be focused on the shorter part of the yield
curve, and in particular on sovereign bonds with a maturity of
between one and three years.

No ex ante quantitative limits are set on the size of Outright
Monetary Transactions.

Creditor treatment

The Eurosystem intends to clarify in the legal act concerning
Outright Monetary Transactions that it accepts the same (pari
passu) treatment as private or other creditors with respect to
bonds issued by euro area countries and purchased by the
Eurosystem through Outright Monetary Transactions, in accordance
with the terms of such bonds.

Sterilisation

The liquidity created through Outright Monetary Transactions will
be fully sterilised.

Transparency

Aggregate Outright Monetary Transaction holdings and their market
values will be published on a weekly basis. Publication of the
average duration of Outright Monetary Transaction holdings and
the breakdown by country will take place on a monthly basis.

Securities Markets Programme

Following today’s decision on Outright Monetary Transactions, the
Securities Markets Programme (SMP) is herewith terminated. The
liquidity injected through the SMP will continue to be absorbed
as in the past, and the existing securities in the SMP portfolio
will be held to maturity.

On 6 September 2012 the Governing Council of the European Central
Bank (ECB) decided on additional measures to preserve collateral
availability for counterparties in order to maintain their access
to the Eurosystem’s liquidity-providing operations.

Change in eligibility for central government
assets

The Governing Council of the ECB has decided to suspend the
application of the minimum credit rating threshold in the
collateral eligibility requirements for the purposes of the
Eurosystem’s credit operations in the case of marketable debt
instruments issued or guaranteed by the central government, and
credit claims granted to or guaranteed by the central government,
of countries that are eligible for Outright Monetary Transactions
or are under an EU-IMF programme and comply with the attached
conditionality as assessed by the Governing Council.

The suspension applies to all outstanding and new assets of the
type described above.

The decision on the collateral eligibility of bonds issued or
guaranteed by the Greek government taken by the Governing Council
on 18 July 2012 is still applicable (Decision ECB/2012/14).

Expansion of the list of assets eligible to be used as
collateral

The Governing Council of the ECB has also decided that marketable
debt instruments denominated in currencies other than the euro,
namely the US dollar, the pound sterling and the Japanese yen,
and issued and held in the euro area, are eligible to be used as
collateral in Eurosystem credit operations until further notice.
This measure reintroduces a similar decision that was applicable
between October 2008 and December 2010, with appropriate
valuation markdowns.